Reports of a 'mortgage renewal cliff' have been greatly exaggerated

Few real estate stories have had more hype in the last year than the dreaded mortgage renewal shock, a.k.a. “mortgage renewal cliff,” “mortgage renewal wall,” or whatever other ominous-sounding metaphor commentators came up with.

Horrific predictions of 60 per cent payment increases made headlines, while the bank regulator warned a tidal wave of mortgages (three-quarters of all mortgages) would come up for renewal by year-end 2026. Countless economists threw in their two cents, with RBC predicting $275 billion of renewals next year alone.

It’s high time to dial down the drama. Here are six reasons why the mortgage renewal “wall” will probably be a knee-high picket fence — at least for most people.

Getting a prime mortgage in Canada comes with a pop quiz: can you handle a rate at least two percentage points above your actual? That’s the government’s stress test.

Flashback to five years ago: folks snagging mortgages at 2.50 per cent had to prove they could manage payments at rates around 5.19 per cent. Fast forward, and today’s fixed-rate renewers are coasting in at just 4.29 to 4.99 per cent. So, we’re not just talking about mortgagors passing the test; they’re scoring extra credit.

Rates may have doubled, but mortgage payments surely haven’t followed suit.

On the average mortgage, which is about $300,000 in Canada, going from 2.5 per cent to five per cent after five years boosts one’s payment by 29 per cent ($353 per month). And, it can be much lower if the remaining amortization is less.

That is no doubt still a lot for many families suffering under Canada’s burdensome cost of living. Many folks with strained budgets will renegotiate into a longer amortization to trim payments. And even if they don’t qualify for a full